1Department of Management, London School of Economics and Political Science, London WC2A 2AE, UK

2Department of Economics, London School of Economics and Political Science

Correspondence to: G Bevan R.G.Bevan{at}lse.ac.uk

Gwyn Bevan and Matthew Skellern review evidence on the effects of hospital competition on quality of care within the English NHS and question whether they support government proposals to extend competition

The health secretary, Andrew Lansley, has proposed changes to the English National Health Service (NHS) that will extend the hospital market introduced by “New Labour” in the 2000s.12 This was the second era of hospital competition within the NHS; the first, the “internal market,” applied throughout the UK from 1991 to 1997. Studies of the NHS markets have generally used one of two paradigms,w1 either analysing the effects of the market on the various players34567 or using econometric methods to test the relation between competition and outcomes.89101112 A recent review encompasses both kinds of study.13 The different types of study have come to different conclusions, and findings from recent econometric studies1011 have proved intensely controversial.w2-w7 We outline the key features of the two eras of hospital competition and review the literature and debates, focusing on the effects of hospital competition on the quality of care rather than on the costs (such as transaction costs) of competition7 or other effects.

Two eras of hospital competition in the English NHS

During 1991-97, a period of limited growth in NHS funding, an “internal market” was introduced throughout the United Kingdom.9131415 It changed health authorities’ responsibilities by separating the roles of purchaser and provider of healthcare. Hospitals were made independent of health authorities, typically as directly managed units, which became NHS trusts regulated by the Department of Health. Health authorities contracted selectively with providers and constrained general practitioners’ referral options. However, general practitioners who opted for various forms of general practice fundholdingw8-w10 were allocated cash budgets to contract for …